Correlation Between JAKKS Pacific and Carnival Plc

Can any of the company-specific risk be diversified away by investing in both JAKKS Pacific and Carnival Plc at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining JAKKS Pacific and Carnival Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between JAKKS Pacific and Carnival Plc ADS, you can compare the effects of market volatilities on JAKKS Pacific and Carnival Plc and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in JAKKS Pacific with a short position of Carnival Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAKKS Pacific and Carnival Plc.

Diversification Opportunities for JAKKS Pacific and Carnival Plc

0.82

Correlation Coefficient

JAKKS Pacific  Carnival Plc

Very poor diversification

The 3 months correlation between JAKKS and Carnival is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding JAKKS Pacific and Carnival Plc ADS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carnival Plc ADS and JAKKS Pacific is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on JAKKS Pacific are associated (or correlated) with Carnival Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carnival Plc ADS has no effect on the direction of JAKKS Pacific i.e., JAKKS Pacific and Carnival Plc go up and down completely randomly.

Pair Corralation between JAKKS Pacific and Carnival Plc

Given the investment horizon of 90 days JAKKS Pacific is expected to generate 2.02 times less return on investment than Carnival Plc. In addition to that, JAKKS Pacific is 1.23 times more volatile than Carnival Plc ADS. It trades about 0.12 of its total potential returns per unit of risk. Carnival Plc ADS is currently generating about 0.3 per unit of volatility. If you would invest  1,486  in Carnival Plc ADS on September 3, 2024 and sell it today you would earn a total of  813.00  from holding Carnival Plc ADS or generate 54.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

JAKKS Pacific  vs.  Carnival Plc ADS

JAKKS Pacific

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JAKKS Pacific are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating forward-looking signals, JAKKS Pacific disclosed solid returns over the last few months and may actually be approaching a breakup point.

Carnival Plc ADS

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Carnival Plc ADS are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Carnival Plc disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JAKKS Pacific and Carnival Plc

The main advantage of trading using opposite JAKKS Pacific and Carnival Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAKKS Pacific position performs unexpectedly, Carnival Plc can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Carnival Plc will offset losses from the drop in Carnival Plc's long position.

The idea behind JAKKS Pacific and Carnival Plc ADS pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.